Federal agents seize alleged Silk Road profits worth $35M

Oct. 26, 2013
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APRIL 26: A pile of Bitcoins are shown here after Software engineer Mike Caldwell minted them in his shop on April 26, 2013 in Sandy, Utah. Bitcoin is an experimental digital currency used over the Internet that is gaining in popularity worldwide. / George Frey, Getty Images

The electronic wallet holding 144,336 bitcoins worth $29 million was found on computer hardware allegedly belonging to Ross Ulbricht, 29, who was arrested Oct. 1 at a public library in San Francisco. Silk Road was an illegal drug bazaar that operated in the cyber underworld.

Ulbricht is charged with money laundering, drug dealing, computer hacking and murder-for-hire in courts in Baltimore and New York.

Federal agents also seized the Silk Road website and the bitcoin accounts of the site's buyers and sellers. That seizure included 29,655 bitcoins, now worth $5.8 million, court papers say.

Bitcoin is cash for the Internet. The virtual currency operates by person-to-person exchange without a bank or a central monetary authority, such as the Federal Reserve, to regulate it or issue it. Bitcoin operates with a computer program that creates a personal wallet for each user through which they can send and receive coins. All transactions are logged into shared public ledger called the "block chain," which helps prevent fraud. Transactions have digital signatures that correspond to the sender's address.

There are 11.9 million bitcoins in circulation, according to blockchain.info. A bitcoin on Friday was valued at $197.57.

The Silk Road website, which allowed anonymous trade in illegal drugs, forged documents, hackers and hit men, had nearly a million customers and $1.2 billion in sales, court papers say. Silk Road's operator, known on the site as "Dread Pirate Roberts," allegedly collected commissions worth $80 million. FBI agent Christopher Tarbell called Silk Road "the most sophisticated and extensive criminal marketplace on the Internet today."

Silk Road used an underground computer network known as "The Onion Router" or "Tor" that relays messages through at least three separate computer servers to disguise its users. For an additional layer of anonymity, Silk Road required its buyers and sellers to use only bitcoin, which, unlike credit cards, is difficult to trace.